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MARKET DEVELOPMENT – USD BOUNCES BACK ON NFP, EYES ON POWELL, CHINA CUTS RRR

USD: Today’s stellar NFP report will likely alleviate some immediate concerns of a slowdown in the US, however, this will likely be temporary. The BLS reported that the US added a whopping 312k jobs in December (Exp. 177k), while average earnings had topped estimates with the yearly rate hitting 3.2% for the first time since 2009. Consequently, the USD found support, while equity markets have continued to pare yesterday’s losses.

Although one thing to keep in mind is that the NFP report is a lagging indicator, while forward looking indicators in yesterday’s ISM Mfg. report, notably the new orders component, plunged to 51.1 and now is on the verge of contraction.

Eyes will be Fed’s Powell following the recent commentary from the typically hawkish Fed’s Mester who admitted that downside risks exist, while also stating that monetary policy is at a good spot currently, suggesting that the Fed could pause rate hikes in the short term.

CNY: This morning saw the PBoC announce that it would cut the RRR by 100bps with 50bps on Jan 15th and 50bps on Jan 25th ahead of the Lunar New Year. The PBoC added that it would lead to the release of CNY 1.5tln in liquidity. In turn, this has added to the bounce back in risk assets.

CAD: The turnaround in the Canadian Dollar persists with a better than expected employment report keeping the Loonie supported. The unemployment rate and employment change surpassed analyst estimates; however, the latter had been led by the rise in part-time jobs (seasonal) with full-time jobs in fact declining. Alongside a relatively robust jobs report, the continued push higher in oil prices have further supported the Loonie. However, tyes are on the BoC next week, where it is likely that they will downgrade their growth and inflation forecasts.

USD Eyes Powell After Fed Hawk Suggests Rate Hike Pause, China Cuts RRR - US Market Open

DailyFX Economic Calendar: Friday, January 04, 2019 – North American Releases

USD Eyes Powell After Fed Hawk Suggests Rate Hike Pause, China Cuts RRR - US Market Open

Four Things Traders are Reading

  1. EURUSD Price Analysis: Risks Skewed to the Downside for Eurozone Inflation” by Justin McQueen, Market Analyst
  2. Sterling (GBP): Brexit Volatility Likely to Pummel GBP Next Weekby Nick Cawley, Market Analyst
  3. US Employment Data Smashes Expectations, Dollar and Stocks Soar” by Rich Dvorak, Analyst
  4. Gold Price: Rally Stalls Ahead of US Jobs Report, Fed Speak” by Justin McQueen, Market Analyst

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX